market order on issue of gdr.pdf

7/27/2019 Market Order on Issue of GDR.pdf

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# A client attempting to manipulate the order book by entering a large order on one side then switching to the other side of the book.

## A client is deliberately pushing the price down in an attempt to trigger large amounts of stop loss orders for personal benefit.

WTM/ PS/ISD/02/2011

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

DIRECTIONS UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SEBI ACT, 1992 IN

THE MATTER OF MARKET MANIPULATION USING GDR ISSUES

Background

1. SEBI received alerts like Bait and Switch#, Stop Loss Fishing## and large scale off-markettransactions in its IMSS system regarding a few scrips like IKF Technologies Ltd., Avon Corporation

Limited, Cat Technologies Ltd, Asahi Infrastructure Ltd and K Sera Sera Ltd. A preliminary

examination revealed that FIIs like India Focus Cardinal Fund and Mavi Investment Fund, were

converting the GDRs held by them into normal shares (known as cancelling GDRs) to sell in Indian

markets. It was also observed that most cancellations were happening within a short period from

the issue of the GDRs by the company.

2. From the counterparty analysis of the sale by the FIIs, a few counterparties were repeatedlyappearing among the Top Counterparties. Around 33% to 75% of the shares sold by these FIIs in

various scrips were bought by these recurring clients. In view of such large scale selling by the FIIs

and its matching with these clients, a detailed examination was carried out in these scrips.

3. Following are the Clients and FIIs/ Sub-Accounts which were shortlisted for detailed examinationof their trading along with the companies in which the examination was done. The Clients/FIIs/

Sub-Accounts and companies were shortlisted on the basis of alerts received by SEBI and also on

the basis of repeated appearance of FIIs as major seller and a set of clients as matching

counterparties to these FII trades. The FII/Sub-Accounts are hereinafter referred to as Sub-

Accounts and the client appearing as their counterparties as Group:


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Companies FII/Sub-Accounts/Sellers (Sub-

Accounts)

Indian Clients acting as major

counterparties/Buyers (Group)

Asahi Infrastructure & ProjectsLtd (Asahi)

IKF Technologies Ltd. (Ikf) Avon Corporation Limited

(Avon)

K Sera Sera Ltd (KSera) CAT Technologies Ltd (Cat) Maars Software International

Ltd.(Maars)

India Focus Cardinal Fund(India Focus)

KII Ltd (KII) Mavi Investment Fund

(Mavi)

Sophia Growth (Sophia)

Alka India Ltd (Alka) Basmati Securities (Basmati) S V Enterprises (SV) JMP Securities (JMP) Oudh Finance &

Investments Ltd (Oudh)

4. Following table provides a summary of the trading done by the Sub-Accounts vis--vis Group inthe aforementioned companies. The data provided is for the trades done in BSE. The period of

examination is January 01, 2009 to May 31, 2010, covering around 344 trading days.

Sr.

no Asahi Avon CAT IKF KSERA Maars

1Total Volume (January 01, 2009

to May 31, 2010) in shares 173,568,062 131,375,729 84,306,084 322,679,170 381,821,444 134,577,38

2Avg Daily Volume 508,997 385,266 245,790 938,021 1,109,946 392,3

3No. of Days when Group or Sub-

Accounts have not traded 169 154 106 174 18 20

4 Avg daily market volume onnumber of Days in (3) 36,931 117,720 103,332 374,526 238,676 87,7

5No. of Days when either Group

or Sub-Accounts have traded 172 187 237 170 326 1

6Avg Daily volume on number of

Days in (5) 972,829 599,190 309,506 1,514,773 1,158,053 839,42

7

No. of Times Avg daily volume

with Sub-Account & Group vis--

vis without them(6)/(4) 26.34 5.09 3.00 4.04 4.85 9.

8

No. of Days when only Sub-

Accounts have traded 31 35 18 11 36

9Avg Daily market volume on

number of Days in (8) 1,918,928 1,172,100 675,964 5,236,727 4,369,868 6,555,5

10


with Sub-Account vis--vis

without them (9)/(4) 51.96 9.96 6.54 13.98 18.31 74.

11 Total Sell Volume of Sub- 31,771,646 14,058,611 3,755,001 19,607,456 29,121,430 15,218,24


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Sr.

no Asahi Avon CAT IKF KSERA Maars

Accounts

12

Concentration of Sub-Accounts

(Net) to market volume on days

they have traded (i.e. 8) 53.41% 38.75% 30.86% 34.03% 18.51% 33.16

13No. of days when Group

Members have traded 161 181 233 170 326 1

14Avg Daily market volume on no.

of Days in (13) 1,028,545 604,388 308,674 1,514,773 1,158,053 839,42

15


with Group vis--vis without

them (14)/(4) 27.85 5.13 2.99 4.04 4.85 9.

16Total Purchase by Group 61,019,672 37,630,478 25,484,352 79,905,100 99,394,656 39,075,73

17Total Sale by Group 54,531,543 37,781,778 23,436,576 63,322,661 98,385,183 43,390,4

18

Concentration of Group (gross)

to market volume on days they

have traded (i.e. 13) 34.90% 34.47% 34.10% 27.81% 26.20% 35.34

19

No. of Shares sold by Sub-

Accounts matching to buy of

Group members 19,713,709 7,905,709 1,219,641 14,835,662 14,054,743 7,099,3

20

% of shares matching between

Group and Sub-Accounts to

total sell by Sub-Accounts

[%(19)/(11)] 62.05% 56.24% 32.48% 75.66% 48.26% 46.65

5. Following is observed from the above table. The average daily volume has increased significantly on the days when the entities, Sub-Accounts

and Group, have been observed to be trading in the scrip. In the case of Asahi it is nearly 26 times

the days when these entities have not traded (point no. 7 of above table), indicating the major role

these entities have played in creating liquidity in the scrip.

On days when Sub-Accounts have sold the shares their concentration is ranging from 18% to 53% ofdays net volume. On such days, the volume has increased from 7 times (Cat) to 74 times (Maars)

than compared to when Sub-Accounts are not trading. Thus the selling of the Sub-Account is

expected to have a huge downward pressure on the price of the scrip.


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During the days the Group has traded its total trading is nearly 1/3rd of the total trading in the scripon a gross basis.

6. The detailed examination of the trading of Sub-Accounts and the Group in each of the shortlistedscrip for the period January 01, 2009 to May 31, 2010 is explained in following paragraphs.

Detailed Examination

7. Trading in Asahi Infrastructure The average daily volume of Asahi is 508,997 shares for the complete period of examination. The average daily volume on days when Group members or Sub-Account have not traded is 36,931

shares but on days when Group members or Sub-Account have traded, average daily volume

increases nearly 30 times to 972,829 shares.

There was no trading by any of the suspected entities till August 20, 2009. The average dailyvolume in the scrip from January 01, 2009 to August 20, 2009 is 25,113 shares.

Out of these 341 trading days, Sub-Accounts (India Focus & KII) have traded on only 31 days andonly sold. Their total sell volume is 31,771,646 shares (53.41% of total market volume on net basis

for the 31 days when Sub-Accounts). The average daily volume of market during these 31 days is

1,918,928 shares in Asahi.

There are 161 days when members of Group have traded. Their total purchase is 61,019,672 sharesand total sale is 54,531,543 shares which is 33.29% and 34.9% of the total market volume on gross

basis for the relevant period and for the 161 days when they traded, respectively.

Out of 31,771,646 shares sold by Sub-Accounts in 31 days, 19,713,709 shares (62.05% of sharessold by Sub-Accounts) have been sold to the members of Group in 17 days.

India Focus sold 28,271,646 shares of which 16,962,954 shares (60% of shares sold by India Focus)matched with the Group. Out of these, for 13,460,886 shares (47.6% of shares sold by India Focus)

Buy and Sell order rate was same.

India Focus started selling in the scrip from August 21, 2009 and till September 02, 2009 it sold apaltry 845,793 shares. None of the Group member traded during this period. The price of the scripfell from Rs. 1.68 to Rs. 1.2 during the same period i.e. a fall of 28.57% in 9 trading days since no

support to the prices was provided by the Group. The concentration of India Focus sales to market

volume on net basis is 85.72% during the period.

From September 03, 2009 till October 07, 2009 India Focus sold 5,007,561 shares and Groupbought 3,157,317 shares, out of which 2,809,125 shares sold by India Focus matched with the


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Group (56.10% of shares sold by India Focus and 88.97% of shares purchased by the Group during

the same period). The price of the scrip moved from Rs. 1.15 to Rs. 1.19 during the period i.e. a rise

of 3.48% in 22 trading days. The concentration of India Focus to market volume on net basis is

73.33% during the period. Therefore, this is the period where support to the prices has been

provided by the Group.

During the period October 08, 2009 to November 27, 2009, Sub-Accounts did not trade in the scrip.During the same period Group bought 1,559,160 and sold 2,949,408 shares, which is 41.75% of

total market volume by gross basis. The price of the scrip moved from Rs. 1.23 to Rs. 1.00 during

this period. This net sale of shares by the Group after providing exit to FIIs has been immediate and

counterparties to the Group are scattered clients without any concentration.

From November 30, 2009 till January 11, 2010 once again India Focus sold 22,168,292 shares andGroup bought 25,767,757 shares, out of which 14,070,537 shares matched with the Group (63.47%of shares sold by India Focus and 54.61% of shares purchased by the Group during the same

period). The price of the scrip closed at Rs 1.00 during most of the days in this period. The

concentration of India Focus to market volume on net basis is 31.15% during the period.

During the period January 12, 2010 to May 31, 2010, India Focus sold 250,000 shares on a singleday towards the end i.e. April 26, 3010. During the same period, Group purchased 30,535,438

shares and sold 27,889,102 shares, which is 34.29 % of market volume on gross basis. This net

purchase by the Group may have led to the price of the scrip to move from Rs 1.00 to Rs 1.51

during this period.

On January 13, 2010 KII sold 3,500,000 shares of which 2,750,715 shares (78.59% of shares sold byKII) matched with the Group. Out of these, for 2,671,456 shares (76.3% of shares sold by KII) both

buy and sell order were placed at Rs 1.00.

From the above observations, it is seen that the pattern of trading by the Sub-Account and Groupindicates that Group was acting as the major counterparty to the sell orders of Sub-Accounts as

there was not much demand for the shares of Asahi. In the period from August 21, 2009 to

September 02, 2009 when only India Focus was selling and no Group member was acting as

counterparty, price of the scrip fell from Rs. 1.68 to Rs. 1.2 (a fall of 28.57% in 9 trading session). But

after Group started matching trades as counterparties to the Sub-Accounts, the prices stabilized.

The effect of the downward effect on price of a sudden large supply of shares in the market due to

cancellation of GDRs was therefore observed in the behavior of the connected entities - after an

initial order for sale by Sub-Accounts when Group was absent the price fell sharply after which all


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further sales by the Sub-Accounts were apparently pre-arranged with Group as majority

counterparty, thereby preventing a sharp drop in the price and assured exit.

It may also be noted that for 47.6% of the trades between Sub-Accounts and Group buy order andsell order were placed at same price and for 32.74 % of trades between them Buy and Sell order

were placed at Rs. 1.00. Therefore the trading data clearly indicates that Group have helped in the

Sub-Accounts selling their shares by acting as counterparties to most of their trades and by

supporting the price of the scrip. This ensured that the Sub-Account received a sale price higher

than their purchase price of Re. 1 per share. It is observed that entities of Group also traded among

themselves apart from being counterparties to Sub-Accounts. Following is the summary of trades

among the two sets of entities:

Buy Clients

Sell

Clients

Clients BASMATI JMP SV

Total Sell

to Group Total Sell

% sell to

Group out

of Total sell

KII 750,755 0 2,000,000 2,750,755 3,500,000 78.59

INDIA FOCUS 11,651,654 1,900,000 3,411,300 16,962,954 28,271,646 60.00

Grand Total 12,402,409 1,900,000 5,411,300 19,713,709 31,771,646 62.05

From the above table it is clear that the counterparties of the trades of FII are mostly Group entities.Basmati, SV and JMP have altogether purchased 60% of the total shares sold by India Focus.

Similarly, SV and Basmati have altogether purchased 78.59% of the total shares sold by KII.

Subsequently, Group entities are also observed selling their shares in the market which also includestrading among the members of the Group as given below:

Buy Clients

Sell

Clients

Clients BASMATI JMP SV

Total Sell

to Group Total Sell

% sell to

Group out

of Total sell

OUDH 0 0 200,000 200,000 517,260 38.67

JMP 149,800 0 179,359 329,159 2,100,500 15.67

SV 1,820,012 100,500 611,345 2,531,857 26,920,129 9.41

BASMATI 56,810 0 1,052,669 1,109,479 24,993,654 4.44

Grand Total 2,026,622 100,500 2,043,373 4,170,495 54,531,543 7.65

Following is the summary and profit figures of the trades by the Group in Asahi:


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Group

Entity Buy Qty Buy Value

Avg Buy

Price Sell Qty Sell value

Avg Sell

Price Profit/Loss

BASMATI 31,008,224 36,068,314 1.16 24,993,654 30,859,498 1.23 1,787,244

SV 27,367,315 37,109,925 1.36 26,920,129 37,399,347 1.39 895,804

JMP 2,100,500 2,146,720 1.02 2,100,500 2,169,893 1.03 23,683OUDH 543,633 716,025 1.32 517,260 680,884 1.32 -404

Total 61,019,672 76,040,984 1.25 54,531,543 71,109,622 1.30 2,706,327

The Group has made a profit of Rs. 2,706,327 from their dealings in the scrip of Asahi.

8. Trading in Avon Corporation There was no trading by any of the suspected entities till June 16, 2009 and the average daily

volume in the scrip was 60,466 shares. The total volume of the scrip Avon during the entire period

is 131,375,729 shares for 341 trading days with an average daily volume of 385,266 shares.

Out of the 341 trading days there are 154 trading days when neither Group nor Sub-Accounts havetraded in the scrip. The average daily volume of the scrip on these 154 trading days is 117,720

shares. On 187 days when either member of the Group or Sub-Accounts is trading, the average

daily volume is 599,190 shares. This is around 5 times of the average daily volume on days when

none of the Sub-Accounts or Group members are trading in the scrip. Out of these 341 trading

days, Sub-Accounts (India Focus & KII) have traded on only 35 days. Their total sell volume is

14,058,611 shares which is 10.70% of total market volume on net basis and 38.75% of total market

volume on days it is observed to be trading. They have not purchased any share of Avon during the

period. All the shares sold by them have been acquired after converting GDRs into normal shares.

There are 181 days when members of the Group have traded. Their total purchase is 37,630,478shares and total sale is 37,781,778 shares which is 28.70% on gross basis of the market volume for

the complete period and 34.47% of the market volume for the 181 days when Group traded.

There are 8,902,463 shares traded between members of the group i.e. 23.61% of the shares tradedby the members of the group are among themselves.

Out of 14,058,611 shares sold by Sub-Accounts in 35 days, 7,905,709 shares (56.24% of shares soldby Sub-Accounts) have been sold to the members of the Group in 20 days.

India Focus sold 12,358,611 shares of which 7,151,761 shares (57.86 % of shares sold by IndiaFocus) matched with the Group. Out of these, for 5,402,285 shares (43.71% of shares sold by India

Focus) buy and sell order rate was same.


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India Focus started selling in the scrip from August 03, 2009 and continued selling till May 18, 2010during the period. The price of the scrip moved from Rs 11 on August 03, 2009 to Rs 6.11 on May

18, 2010. The average percentage daily value of its sell figure to total market volume on days it is

observed to be trading is 38.75%.

KII has sold 1,700,000 shares of which 763,948 shares (44.93 % of shares sold by KII) matched withthe Group. Out of these, for 502,568 shares (29.56% of shares sold by KII) both buy and sell order

rates were same.

The pattern and analysis of trading in Avon, as observed from above, is very similar to that in Asahiand also to that in Cat, IKF, K Sera and Maars (explained later), both for between the Sub-Accounts

and Group as also among the entities of Group.

The following table provides a break-up of sell trades of Sub-Accounts to Group members.Buy Clients

Sell

Clients

Row Labels BASMATI OUDH SV

Total Sell

to Group

Entities Total Sell

% sell to

Group

out of

Total sell

INDIA

FOCUS 3,146,551 1,796,694 2,311,178 7,254,423 12,358,611 58.7

KII 0 0 651,286 651,286 1,700,000 38.31

Grand Total 3,146,551 1,796,694 2,962,464 7,905,709 14,058,611 56.23

The counterparties of the trades of FII are mostly Group entities. Basmati, SV and JMP have

altogether purchased 58.70% of the total shares sold by India Focus. Similarly, SV alone has

purchased 38.31% of the total shares sold by KII.

Also, when these entities are in turn selling their shares in the market, the buyers are scattered.None of the Group entities have held on to the shares of Avon. Hence, it is clear that all the Group

entities have not bought the shares from Sub-Accounts with a view of long term investment.

Following is the client wise break-up of trades that have happened among the Group members.


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Buy Clients

Sell

Clients

Row

Labels ALKA BASMATI JMP OUDH SV

Total Sell

to Group

Entities Total Sell

% sell to

Group

out of

Total se

JMP 37,615 484,684 39,226 25,000 618,653 1,205,178 1,838,026 65.ALKA 0 0 209,909 0 287,986 497,895 1,310,478 37.

SV 497,281 1,943,409 908,285 810,511 328,071 4,487,557 18,871,024 23.

OUDH 0 88,792 110,209 0 571,267 770,268 3,923,219 19.

BASMATI 552,984 12,347 254,818 67,605 1,053,811 1,941,565 11,839,031 16.

Grand

Total 1,087,880 2,529,232 1,522,447 903,116 2,859,788 8,902,463 37,781,778 23.

Considering the fact that Group entities prima facie have connections with one another and alsowith few Sub-Accounts, it seems that overall trading by them has given a false impression to the

market of high volume. This is further substantiated since the Group is keeping the trading volumes

high by trading among themselves in order to keep interest levels alive and easily off-load shares to

unsuspecting investors whenever the Group buys from the Sub-Accounts.

Following is the summary and profit/loss of the trades by Sub-Accounts and the Group in Avon:


Avg Buy

Value Sell Qty Sell Value

Avg Sell

Value Profit/(Loss)

BASMATI 11,617,990 112,217,010 9.66 11,839,031 107,868,229 9.11 -6,362,737

SV 18,859,585 199,602,386 10.58 18,871,024 197,162,291 10.45 -2,559,608

ALKA 1,391,958 15,836,166 11.38 1,310,478 12,427,013 9.48 -2,482,162

OUDH 3,923,219 34,811,588 8.87 3,923,219 32,726,882 8.34 -2,084,706

JMP 1,837,726 20,607,358 11.21 1,838,026 20,811,946 11.32 201,190

Total 37,630,478 383,074,508 10.18 51,840,389 483,473,521 9.33 -13,288,023

Profit does not appear to be a primary objective of the trading by the Group as the total loss registered

by the Group is Rs. 13,288,023. It appears that the dealings in the scrip by the Group were only to

provide exit to Sub-Accounts without concern for economic profits.

9. Trading in CAT Technologies The total volume in the scrip during the period of examination is 84,306,084 shares with an average

daily volume of 245,790 shares.

The average daily volume in the scrip on days when there has been no trading observed by Groupand Sub-Accounts (106 days) is 103,332 shares. Whereas, the average daily volume on days when

Group or Sub-Account have been observed to be trading (237 days) 309,506. Thus on an average


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basis, the volume on days when these suspected entities have traded is nearly 3 times of the days

when they have not traded

The Sub-Accounts have traded on 18 days. The average daily volume on days when the Sub-Accounts have traded is 675,964 shares. Sub-Accounts have in total sold 3,755,001 shares during

the complete period which is 30.86% of the total market volume of the scrip on days of trading by

Sub-Accounts I.e. 18 days. Thus the average shares sold by Sub-Account in a day are approximately

twice the average daily volume of the scrip on days when Sub-Account or Group has not traded.

There are 233 days when members of the Group have traded. Their total purchase is 25,484,352shares and total sale is 23,436,576 shares which is 30.42% on gross basis of the market volume for

the 233 days when Group has traded.

Total 7,699,279 shares were traded among the Group members. Thus 31.47% of the trading of theGroup members is within the group.

From data obtained from the company it is observed that 15,480,000 shares were acquiredby FIIs and Sub-Accounts post cancellation of GDRs of CAT Technologies, out of which

India Focus Cardinal Fund acquired 720,000 shares. India Focus has sold 245,000 of these

shares on Indian Stock markets. Following is the Client wise break-up of sell trades of Sub-

Accounts that have matched with the Group.

Buy Clients

Sell

Clients

Client

Names ALKA BASMATI OUDH

Total Sell

to Group

Entities Total Sell

% sell toGroup

out of

total sell

INDIAFOCUS 0 94,990 149,999 244,989 245,000 100

SOPHIA 300,000 674,650 0 974,650 3,000,001 32.49

MAVI 0 0 0 0 510,000 0

Grand Total 300,000 769640 149,999 1,219,639 3,755,001 32.48

It is observed that out of these 245,000 shares sold by India focus, 244,989 shares were bought byBasmati and Oudh. Since all these three entities are prima facie connected to each other and nearly

100% of the sell quantity is picked up by the Group, more than just a suspicion arises that the

trades might be pre-arranged and synchronized in nature. India Focus sold 150,000 shares on

November 23, 2009 and rest 95,000 shares on November 25, 2009.


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Following explains a sequence of orders put in the system by Sub-Accounts and Group members.Such instances of matching of trades between Sub-Accounts and Group strengthens the suspicion

that the trading between them is structured to provide exit to the Sub-Accounts:

On November 23, 2009 out of 150,000 shares sold by India Focus 149,999 were bought by Oudh.

November 23, 2009: Oudh entered its first order of the day in CAT at 14:07:18 with a bid order of

150,000 shares at Rs 12.10 of which 831 shares got traded at 14:10:00 with some client. At 14:10:04.

Oudh deleted its order of remaining 149,169 shares. At 14:13:57 India Focus enters a sell order of

150,000 shares at Rs. 12.10. After 35 seconds, at 14:14:22 Oudh enters a bid order of 15,000 shares

at Rs. 12.10. From 14:14:22 till 14:15:32, i.e. within a span of 70 seconds Oudh enters 17 bid orders

of total 151,169 shares. All these orders are limit orders and all of these orders are at Rs. 12.10. Thus

149,999 shares from the said bid orders of Oudh get matched with the sell order placed by India

Focus. After 14:15:32 i.e. when the complete sell order of India Focus matches with thecounterparties, Oudh doesnt place a single order throughout the day. It seems that Oudh already

had the knowledge that India Focus is going to place a sell order and Oudh enters its buy order

within 25 or 35 seconds of order of India Focus. Further, Oudh has not traded in the scrip after the

order of 150,000 shares of India Focus gets completed. Therefore it is clear from the instance that

trade of 149,999 shares that happened between Oudh and India Focus is pre-determined and

synchronised.

Similarly, on November 25, 2009 out of 95,000 shares sold by India Focus, 94,990 shares get tradedwith Basmati thereby indicating synchronized trades between them:

November 25, 2009: Basmati placed a bid order of 1000 shares at 10:09:22 at Rs. 10.88. The order gets

immediately executed. Similarly from 10:09:22 till 10:10:07 Basmati enters 5 orders of 4,111 shares. All

the orders are entered at Rs. 10.88. Out of these 2,750 shares get traded. At 10:11:47 Basmati enters a

bid order of 50,000 shares at Rs. 10.91. At 10:11:50 Basmati enters another bid order of 50,000 shares

at Rs. 10.92 followed by two orders of 5,000 shares and 1,000 shares. Then at 10:12:38 and 10:12:53,

Basmati amends its two bid orders of 50,000 shares and revises the bid price to Rs. 10.95 and 10.96

from 10.91 and 10.92, respectively. At 10:13:19 , Basmati enters another order of 50,000 shares at Rs.

11.00. It then again amends the bid price of its previous order of 50,000 shares, at Rs, 10.95, to Rs.

11.00. Then it amends its previous order of 50,000 shares at Rs. 10.96 and changes the order size to

5,000 from 50,000. At this point of time, Basmati has bid orders of 111,513 shares pending in the order

book. Basmati continues its amending and entering bid orders till 10:16:02. At this point of time

Basmati has pending bid orders of 118,581 shares including two orders of 50,000 shares each at Rs.


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11.05. Till this time i.e. 10:16:02, Basmati has bought 7,350 shares since it started entering orders at

10:09:22. At 10:16:03 India focus enters a sell order of 95,000 shares at Rs. 11.00. The sell order of

India Focus immediately starts matching with bid orders of Basmati. At 10:16:04 all 95,000 shares of

India Focus get sold, out of which 94,990 gets matched with the pending bid orders of Basmati. After

the sell order of 95,000 shares of India Focus gets completed Basmati deletes its pending Bid orders.

Basmati starts selling shares of CAT at 10:28:16 and subsequently sells 52,915 shares till 15:45:04,

including post-close trading. Trading pattern and order book analyses indicate that Basmati had prior

knowledge of sell order of India Focus and it had placed large orders to match the order of India Focus.

Basmati was also amending its bid orders to higher bid price repeatedly for the sole purpose that it

matches only the sell order of India Focus. Basmati later on sells nearly 52,915 shares gradually

throughout the trading period of the day.

These shares which have been purchased by the Group but are not held by them since theyoffloaded their holdings in the scrip to a large number of scattered clients. A large portion of their

trading is among them. This further indicates that their main objective is to keep the trading active

in the scrip. Following is the client wise break-up of the sell trade of the Group that has happened

among themselves.

Buy Clients

Sell

Clients

Client

Names ALKA BASMATI JMP OUDH SV

Total Sell

to Group

Entities Total Sell

% sell to

Group out

of total sell

ALKA 0 0 30,000 0 9,578 39,578 39,578 100.00

JMP 0 1,938,681 138,102 0 74,511 2,151,294 2,579,298 83.41

SV 170,000 1,264,404 88,400 805,016 147,769 2,475,589 8,214,432 30.14

BASMATI 100,000 58,271 2,134,208 148,874 440,281 2,881,634 11,121,100 25.91

OUDH 0 150,578 0 0 606 151,184 1,482,168 10.20

Grand Total 270,000 3,411,934 2,390,710 953,890 672,745 7,699,279 23,436,576 32.85

The following table provides the summary of Profit/Loss made by the Group entities.Entity Buy Qty Buy Value

Avg Buy


Avg Sell

Value

Profit/

(Loss)

BASMATI 11,772,574 85,055,794 7.22 11,121,100 89,544,444 8.05 9,195,491

ALKA 570,000 2,657,100 4.66 39,578 323,298 8.17 1,133,825

OUDH 2,189,686 23,276,678 10.63 1,482,168 16,871,427 11.38 1,115,767

JMP 2,579,299 17,772,255 6.89 2,579,298 17,659,095 6.85 -113,153

SV 8,372,793 74,301,576 8.87 8,214,432 72,658,000 8.85 -238,254

Total 25,484,352 203,063,403 7.97 23,436,576 197,056,264 8.41 11,093,676

10.Trading in IKF technologies


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The total volume of the scrip IKF during the period is 322,679,170 shares for 344 trading days withan average daily volume of 938,021 shares.

Out of the 344 trading days there are 174 trading days when neither Group nor Sub-Accountstraded in the scrip. The average daily volume of the scrip on these 174 trading days is 374,526

shares. On rest 170 days when either member of the Group or Sub-Accounts traded, the average

daily volume is 1,514,773 shares, which is about 4 times that of days when none of the suspected

clients are trading.

There was no trading by any of the suspected entities till April 01, 2009. The average daily volumein the scrip from January 01, 2009 to April 01, 2009 is 329,621 shares.

Out of these 344 trading days, India Focus has traded on only 11 days. Its total sell volume is19,607,456 shares (34.03% of total market volume 0f 57,603,997 shares of these 11 days).

The following table gives the summary of trading by India Focus in IKF vis--vis the Group.

Date

India

Focus Sell

Group

Buy

Group

Sell

Group

Gross

No. of

Shares

Matched

between

India Focus

and Group

% of

shares

Matched

to India

Focus

trades

% of

shares

Matched

to Group

Buy trades

21-Aug-09 607,456 785,343 566,077 1,351,420 382,696 63.00 48.73

25-Aug-09 600,000 751,199 433,681 1,184,880 397,048 66.17 52.86

26-Aug-09 1,000,000 2,970,981 2,680,590 5,651,571 693,760 69.38 23.35

28-Aug-09 500,000 562,608 323,964 886,572 475,939 95.19 84.60

31-Aug-09 5,100,000 8,556,100 7,777,963 16,334,063 2,908,733 57.03 34.00

07-Sep-09 1,800,000 3,194,664 2,757,753 5,952,417 370,002 20.56 11.58

15-Sep-09 4,000,000 4,275,397 643,890 4,919,287 3,872,587 96.81 90.58

09-Nov-09 1,000,000 1,852,010 1,662,692 3,514,702 994,654 99.47 53.71

13-Nov-09 2,000,000 3,251,301 839,959 4,091,260 2,000,000 100.00 61.51

16-Nov-09 1,000,000 1,777,132 1,120,216 2,897,348 740,243 74.02 41.65

23-Nov-09 2,000,000 2,139,940 864,791 3,004,731 2,000,000 100.00 93.46

It is observed from the above table that in a day, 57% to 100% of the sell trades of India Focus havematched with the Group Entities as counterparties. On November 13, 2009 and November 23, 2009

100% of the trades of India Focus has matched with a Group Member. Similarly on September 15,

2009 and November 09, 2009, more than 96% of the trades of India Focus got matched with the

Group.


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The following table gives the break-up of the Group members who have bought shares from theSub-Account, India Focus in this case.

Buy Clients

ClientNames Alka Basmati JMP Oudh SV

Total Sell

to GroupEntities Total Sell

% sell to

Group vis--vis total sell

Sell

Clients

India

Focus 1,094,788 7,113,479 1,861,726 3,880,064 885,605 14,835,662 19,607,456 75.6

From the table it is observed that India Focus has sold 19,607,456 shares of which 14,835,662

shares (75.66% of shares sold by India Focus) matched with the Group members.

Out of these 14,835,662 shares, there were 9,969,399 shares for which (50.84% of shares sold byIndia Focus) Buy and Sell order rate was same.

India Focus has not purchased any share of IKF during the complete period. All the shares sold by ithave been acquired after converting GDRs into normal shares in India.

The significant observations in IKF are synchronised trades executed between the Sub-Accountsand Group and a large proportion of orders matched with each other. A detailed examination of

the trades by these entities was done to identify possible synchronised trades for November 23,

2009, as described in minutiae:

Time Activity (prices are quoted in Rupees)

14:20:13

India Focus Enters Ask Order of 200,000 shares at Rs. 4.5. Only 20,000 shares were disclosed in the

order. The Last Traded Price is Rs. 4.40, the Best Bid Rs. 4.30 and Best Ask Rs. 4.40.

14:23:18 India Focus amends order of 200,000 shares to 2,000,000 shares; 200,000 shares disclosed, at Rs 4.5

14:24:45

Oudh places a fully disclosed Bid order of 50,000 shares at Rs. 4.6. LTP is 4.4, Best Bid Rs. 4.36 and

Best Ask Rs. 4.40. Thus Oudh places its Bid order at 4.5% above LTP and Best Ask Price

14:24:45

All the pending Ask orders with order rate between 4.4 and 4.5 get matched with the Bid order of

Oudh. In total 17 trades of 15,675 shares happen with other random clients.

14:24:45

The pending order of India Focus at 4.5 gets matched with the Bid order of Oudh and remaining

34,325 shares of the Oudhs order gets traded.

14:24:51

Oudh places bid order of 50,000 shares at 4.7. LTP is 4.5. Best Bid Price is 4.36 and Best Ask price is

4.5. Thus, Oudh places its Bid order 4.44% above LTP and Best Ask Price.14:24:51 The Order placed by Oudh matches with pending order of India Focus and 50,000 shares get traded.

14:24:55

Oudh places bid order of 75,000 shares at 4.7. LTP is 4.5, Best Bid Price is 4.36 and Best Ask price is

4.5. Thus, Oudh places its Bid order 4.44% above LTP and Best Ask Price.

14:24:55

The order placed by Oudh gets matched with pending order of India Focus and 75,000 shares get

traded between them at 4.5.

14:25:00 Oudh places Bid order of 125,000 shares at 4.7. LTP is 4.5. Best Bid Price and Best Ask price is 4.36


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Time Activity (prices are quoted in Rupees)

and 4.49. Thus, Oudh places its order 4.44% above LTP and Best Ask Price.

14:25:01 Trade of 2000 shares occurs between Oudh and some other client.

14:25:01

The Order placed by Oudh matches with pending order of India Focus and 123,000 shares get


14:25:06

Oudh places Bid order of 200,000 shares at 4.7. LTP is 4.5. Best Bid Price and Best Ask price is 4.36


14:25:07

The Order placed by Oudh Gets matched with pending order of India Focus and 200,000 shares get


14:25:11

Oudh places bid order of 250,000 shares at 4.7. LTP is 4.49. Best Bid Price and Best Ask price is 4.36


14:25:11



14:25:13



14:25:14



14:25:35



14:25:36



14:26:34



14:26:34


traded between them at 4.5.14:27:11 Basmati places bid order of 100 shares at 4.5. LTP is 4.49. The order gets traded with India Focus

14:28:05

Basmati places bid order of 50,000 shares at 4.7. LTP is 4.5. Best Bid Price and Best Ask price is 4.36


14:28:05 Remaining 48,575 shares of the pending order of India Focus gets sold to the order of Basmati.

14:28:08

14:28:09

Oudh Places a bid order of 50,000 shares (5,000 disclosed, 45,000 undisclosed) at 4.7. The order

gets matched with scattered clients.

From the above sequence of orders and trading between Oudh, Basmati and India Focus, it isobserved that the orders placed Oudh were only around the period when India Focus entered its

Ask order and it was pending in the system. The orders placed by Oudh were all at Rs. 4.7, whereas

the LTP and the Best Ask order during the order entry, for all the orders by Oudh, was Rs. 4.5. Oudh

repeatedly entered its order nearly 4 to 5 % above the last traded price and best ask order rate.

This behaviour of Oudh and Basmati indicates that there were efforts by Oudh to match its orders

with Ask orders of India Focus rather than any economic rationale behind the trades. Further, after


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complete execution of the order of India Focus during the day, only one order of 50,000 shares was

placed by Oudh and no other order was placed by the Group for the rest of the day.

There are 170 days when members of The Group have traded. Their total purchase is 79,905,100shares and total sale is 63,322,661 shares which is 22.19% of the total market volume on gross

basis for the complete period of 344 days. The total market volume on these 170 days when the

Group have traded is 257,511,491 shares which is 79.80% of total volume in the scrip for the

complete period of investigation of 344 trading days, i.e. January 01, 2009 to May 31, 2010.

Out of the total 79,905,100 shares purchased and 63,322,661 shares sold by the group, 16,894,582shares (23.59% of total purchased/sold by the Group on gross basis) were traded among the Group.

Following table gives the client wise break-up of sell trades of the Group that have been tradedamong Group members only.

Buy Clients

Client

Names Alka Basmati JMP Oudh SV

Total Sell

to Group

Entities Total Sell

% sell to

Group

Entities vis-

vis total sell

Sell

Clients

Alka 276 98,546 854,511 0 0 953,333 2,174,298 43.

JMP 160,834 1,001,563 2,470,663 507,097 1,666,113 5,806,270 18,030,802 32.

SV 245,980 2,363,703 1,306,180 2,386,697 79,545 6,382,105 23,168,840 27.

Basmati 380,000 15,910 3,069,621 26,492 183,257 3,675,280 18,495,370 19.

Oudh 0 0 77,594 0 0 77,594 1,453,351 5.

GrandTotal 787,090 3,479,722 7,778,569 2,920,286 1,928,915 16,894,582 63,322,661 26.

Out of these 1,222,679 shares (7.23% of total shares traded within the group) were apparentlytraded through synchronised trades (i.e. same order rate, same order qty and order placed within 1

minute of each other). Following table provides the extract of all the trades among the Group

entities which are synchronised:

Trade DateBuy (B)

Client

Sell (S)

Client

Trade

Qty

Trade

RateTrade Value

B Order

Time

S Order

Time

B Order

Qty

S Order

Qty

B Order

Rate

S Orde

Rate

21-Aug-09 Basmati SV 25,000 4.21 105,250.00 15:18:51 15:18:43 25,000 25,000 4.21 4.

26-Aug-09 SV JMP 99,071 4.40 435,912.40 10:15:23 10:15:56 100,000 100,000 4.40 4.4

31-Aug-09 JMP JMP 131,604 4.51 593,534.04 12:07:51 12:08:37 200,000 200,000 4.51 4.

31-Aug-09 JMP Basmati 18,548 4.31 79,941.88 12:09:11 12:09:07 500,000 500,000 4.31 4.

31-Aug-09 JMP Basmati 452,000 4.31 1,948,120.00 12:09:11 12:09:17 500,000 500,000 4.31 4.

31-Aug-09 JMP SV 21,000 4.31 90,510.00 12:26:05 12:25:57 25,000 25,000 4.31 4.

31-Aug-09 JMP SV 4,000 4.31 17,240.00 12:26:05 12:26:12 25,000 25,000 4.31 4.


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Trade DateBuy (B)

Client

Sell (S)

Client

Trade

Qty

Trade

RateTrade Value

B Order

Time

S Order

Time

B Order

Qty

S Order

Qty

B Order

Rate

S Orde

Rate

21-Aug-09 Basmati SV 25,000 4.21 105,250.00 15:18:51 15:18:43 25,000 25,000 4.21 4.

26-Aug-09 SV JMP 99,071 4.40 435,912.40 10:15:23 10:15:56 100,000 100,000 4.40 4.4

31-Aug-09 JMP JMP 131,604 4.51 593,534.04 12:07:51 12:08:37 200,000 200,000 4.51 4.

31-Aug-09 JMP Basmati 18,548 4.31 79,941.88 12:09:11 12:09:07 500,000 500,000 4.31 4.

7-Sep-09 JMP JMP 6,689 4.30 28,762.70 13:15:41 13:15:37 10,000 10,000 4.30 4.

7-Sep-09 JMP Basmati 290,317 4.40 1,277,394.80 13:21:02 13:21:14 400,000 400,000 4.40 4.4

30-Oct-09 SV JMP 14,776 4.63 68,412.88 12:12:06 12:12:04 50,000 50,000 4.63 4.

30-Oct-09 SV JMP 35,224 4.63 163,087.12 12:12:15 12:12:04 50,000 50,000 4.63 4.

6-Nov-09 SV JMP 25,000 5.38 134,500.00 12:00:11 12:00:16 25,000 25,000 5.38 5.

6-Nov-09 SV JMP 25,000 5.47 136,750.00 12:18:25 12:18:32 25,000 25,000 5.47 5.4

13-Nov-09 Basmati SV 44,750 4.96 221,960.00 15:25:45 15:25:40 50,000 50,000 4.96 4.

5-Mar-10 JMP SV 1,996 4.01 8,003.96 15:20:19 15:20:23 5,000 5,000 4.01 4.0

5-Mar-10 JMP SV 3,004 4.01 12,046.04 15:20:19 15:20:29 5,000 5,000 4.01 4.011-Mar-10 SV JMP 24,700 4.65 114,855.00 09:17:00 09:17:03 25,000 25,000 4.65 4.

The Profit/Loss made by the Group Entities is given below.Buy Qty Buy Value

Avg Buy


Avg Sell

Price Profit/(Loss)

Basmati 29,130,579 130,018,064 4.46 18,495,370 78,122,572 4.22 -4,427,527.30

Oudh 7,495,023 33,205,028 4.43 1,453,351 5,879,699 4.05 -559,048.10

SV 23,154,140 106,101,638 4.58 23,168,840 106,370,531 4.59 201,403.60

Alka 2,174,298 9,339,399 4.30 2,174,298 9,564,366 4.40 224,967.20

JMP 17,951,060 82,239,986 4.58 18,030,802 82,877,111 4.60 270,597.10

Total 79,905,100 360,904,114 4.52 63,322,661 282,814,279 4.47 -4,289,608

It is observed from above table that Profit / Loss made by these entities may not bear any relationto their total trading in the scrip, as was seen in other scrips examined indicating that economic

benefit might not be the primary objective of these entities trading in these companies.

11.Trading in K Sera Sera Ltd The total volume of the scrip K Sera on BSE during the period is 381,821,444 shares for 344 trading

days with an average daily volume of 1,109,946 shares.




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daily volume is 1,158,053 shares. This is around 5 times of the average daily volume on days when

neither Sub-Accounts nor Group is trading in the scrip.

The Group has been trading throughout the year except for the period March 12, 2009 to March31, 2009, when 8 out of 13 trading days, there was no trading by the Group. Interestingly, the value

of the stock fell from 15.8 on March 12, 2009 to Rs. 10.55 on March 20, 2009 and Rs. 10.65 on

March 30, 2009

Out of these 344 trading days, Sub-Accounts (India Focus, KII and Sophia) have traded on only 36days. Their total sell volume is 29,121,430 shares (6.06 % of total net market volume). During these

36 days the average daily volume of the scrip is 4,369,868 shares which is nearly 6 times of average

daily volume of 728,916 shares for days when Sub-Accounts are not selling their shares. The trading

of Sub-Accounts is 18.51% of the volume of K Sera on net basis of these 36 days when the Sub-

Accounts have traded. They have not purchased any share of K Sera during the period. All theshares sold by them have been acquired after converting GDRs into normal shares in India.

There are 326 days when members of the Group have traded. Their total purchase is 99,394,656shares and total sale is 98,385,183 shares which, on gross basis, is 25.90% of the market volume of

the scrip for complete period and 26.2% of volume of the scrip for days when Group is trading.

There are 16,637,703 shares traded between members of the group i.e. 16.82% of the sharestraded by the members of the group are among themselves.

Out of 29,121,430 shares sold by Sub-Accounts in 36 days, 14,054,743 shares (48.26% of sharessold by Sub-Accounts) have been sold to the Group in 32 days. The shares traded between Sub-

Accounts and Group on a particular day are in the range of 0.56% to 100 % of the total sale of K

Sera shares by the Sub-Accounts. Similarly, the matched number of shares between Sub-Accounts

and Group goes up to 96.84% of total shares bought by the Group on any particular day.

India Focus has sold 13,545,000 shares of which 8,010,347 shares (59.13 % of shares sold by IndiaFocus) matched with the Group. Out of these, for 6,878,171 shares (85.86% of shares sold by India

Focus to Group members) buy and sell order rate was same.

KII has sold 11,781,430 shares of which 3,482,476 shares (29.56 % of shares sold by KII) matchedwith the Group. Out of these, for 2,864,318 shares (82.25% of shares sold by KII to the group

members) both buy and sell order were same.

A few of the trades between Group and Sub-Accounts appear to be synchronized. Following is the client wise break-up of trades between Sub-Accounts and the Group:


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Buy Clients

Sell

Clients

Row

Labels BASMATI JMP OUDH SV

Total Sell

to Group Total Sell

% sell to

Groupvis--vis

total sell

INDIA

FOCUS 3,835,944 48,523 3,824,611 301,269 8,010,347 13,545,000 59.14

KII 1,736,574 54,000 1,313,835 378,067 3,482,476 11,781,430 29.56

SOPHIA 650,195 0 580,470 1,331,255 2,561,920 3,795,000 67.51

Grand

Total 6,222,713 102,523 5,718,916 2,010,591 14,054,743 29,121,430 48.26

From the table it is clear that counterparties of the trades of FII are mostly Group members.

It is also observed that apart from the Group, NEWGEN INTERNATIONAL PVT LTD (PAN:AACCN3776H) is also a major counterparty to the sell trades of India Focus. 1,424,152 shares sold

by India Focus (10.51% of K Sera shares sold by India Focus) have NEWGEN INTERNATIONAL PVT

LTD as counterparty. In all the trades between NEWGEN INTERNATIONAL PVT LTD and India Focus,

Order rate is same for Bid and Ask order. These trades appear to be synchronised trades. Further,

Oudh, Alka and NEWGEN INTERNATIONAL PVT LTD have same trading member, i.e. SHRIRAM

INSIGHT SHARE BROKER. Therefore, NEWGEN INTERNATIONAL PVT LTD may also be a part of the

Group which would mean that nearly 70% of the shares sold by India Focus were bought by the

Group.

Basmati, Oudh and SV have altogether purchased 59.13% of the total shares sold by India Focus.Similarly, Basmati, JMP, Oudh and SV have purchased 29.56% of the total shares sold by KII.

When these entities are in turn selling their shares in the market, SV, Basmati or Oudh appear asbuyers. They in turn have sold in the market when the buyers are scattered. None of the Group

entities have held on to the shares of K Sera. Following table gives the client wise break-up of

trades that have happened within the Group.


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Buy Clients

Row Labels ALKA BASMATI JMP OUDH SV

Total Sell

to Group

Total Sell

of Client

% sell to

Group vis

-vis tota

sell

Sell

Clients

ALKA 0 276,920 152,199 0 540,070 969,189 2,130,227 45.5

JMP 0 617,548 38,906 20,475 1,128,543 1,805,472 4,290,779 42.0

SV 40,500 3,971,821 1,083,406 850,442 667,394 6,613,563 38,480,046 17.1

OUDH 326,074 550,160 228,998 15,370 971,766 2,092,368 14,840,226 14.1

BASMATI 614,074 76,237 1,108,774 361,146 2,996,880 5,157,111 38,643,905 13.3

Grand Total 980,648 5,492,686 2,612,283 1,247,433 6,304,653 16,637,703 98,385,183 16.9

It is observed in the case of Alka that it has sold 2,130,227 shares of K Sera and bought 1,117,081shares. It has received shares of K Sera as off market transfers from Shriram Insight Share Broker,

Shriram Credit Company and Shriram City Union Finance Ltd.

Hence, it is clear that all the Group members have not bought the shares from Sub-Accounts with aview of long term investment.

It is observed that a large number of trades of Sub-Accounts and Group were matching with oneanother. Out of 36 days, when Sub-Accounts have sold the shares of K Sera, on 32 days Group

members have also traded in the scrip. The shares traded between Sub-Accounts and Group

members on few days are as high as 100% of the total sale of K Sera shares, of the day, by the Sub-

Accounts. Similarly, the matched number of shares between Sub-Accounts and Group goes up to

96.84% of total shares bought by the Group on any particular day.

The Profit/Loss made by the Group is given below and it apparently bears no relation with theirtrading since like in other scrips examined profit may not be the objective of trading by the Group

Entity name Buy Qty Buy Value

Avg Buy


Avg Sell

value Profit/(Loss)

SV 38,908,832 552,033,708 14.19 38,480,046 539,289,684 14.01 -6,660,461Alka 1,117,081 15,618,480 13.98 2,130,227 22,995,122 10.79 -3,559,947

OUDH 16,231,844 216,275,888 13.32 14,840,226 195,890,788 13.2 -1,842,943

JMP 4,221,448 59,185,842 14.02 4,290,779 60,664,496 14.14 498,429

BASMATI 38,915,451 515,024,237 13.23 38,643,905 513,555,443 13.29 2,124,965

Total 99,394,656 1,358,138,155 13.66 98,385,183 1,332,395,533 13.54 -9,439,957


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12. Trading in Maars Software The total volume of the scrip Maars during the period is 134,577,384 shares for 343 trading days

with an average daily volume of 392,354 shares.



daily volume is 839,421 shares. This is around 10 times of the average daily volume on days when

neither the Sub-Accounts nor Group is trading in the scrip.

The trading by FIIs and the Group Members is scattered throughout the year and is not continuousthroughout the period. Thus Group members have traded on January 1, 2 and 5 of 2009. Then theyhave next traded on May 06, 2009. Group members have mainly traded during the period July 02,

2009 to February 18, 2010.

Out of these 343 trading days, Sub-Accounts (India Focus, Sophia Growth & Mavi Investment) havetraded on only 7 days. Their total sell volume is 15,218,242 shares (33.16 % of total market volume

on net basis for the days of trading by Sub-Accounts). They have not purchased any share of Maars

during the period. All the shares sold by them have been acquired after converting GDRs into

normal shares in India. Following is the details of shares sold by them in Maars:

Date

Close

Price Total Market Volume Sub-Account Sell

% Sub-Account

Sell to Total

Market volume

17-Sep-09 3.70 6,341,834 2,108,242 33.24

18-Sep-09 4.07 11,335,596 3,550,000 31.32

22-Sep-09 4.44 10,894,414 3,350,000 30.75

23-Sep-09 4.60 7,930,752 1,710,000 21.56

29-Sep-09 4.24 3,910,366 1,350,000 34.52

17-Nov-09 3.00 1,555,585 1,050,000 67.5013-Jan-10 3.01 3,920,096 2,100,000 53.57

Total 45,888,643 15,218,242 33.16


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Following table gives client wise break-up of shares sold by the Sub-Accounts to the Group:Buy Clients

Row Labels ALKA BASMATI JMP SV

Total Sell

to Group

Entities Total Sell

% sell to

Group

out of

total sell

Sell

Clients

INDIA FOCUS 0 1,487,645 921,540 700,303 3,109,488 6,131,239 50.72

MAVI 647,500 1,659,858 25,000 192,318 2,524,676 2,600,000 97.1

SOPHIA 0 410,205 50,000 1,004,987 1,465,192 6,487,003 22.59

Grand Total 647,500 3,557,708 996,540 1,897,608 7,099,356 15,218,242 46.65

Out of 15,218,242 shares sold by Sub-Account in 7 days, 7,099,356 shares (46.65% of shares sold bySub-Accounts) have been sold to the members of the Group.

India Focus has sold 6,131,239 shares of which 3,109,488 shares (50.71 % of shares sold by IndiaFocus) matched with the Group. Out of these, for 2,189,165 shares (35.70% of shares sold by India

Focus) buy and sell order rate was same.

Mavi has sold 2,600,000 shares of which 2,524,676 shares (97.10 % of shares sold by Mavi)matched with the Group. Out of these, for 1,707,246 shares (65.66% of shares sold by Mavi) both

buy and sell order rates were same.

Following is an extract of the trades executed by Mavi which matched with the Group members inMaars where it is observed that the trades executed by Mavi are apparently synchronised.

NameCounterparty

Name

Trade

QtyTrade Value

Order

Qty

CP

Order

Qty

Order

Rate

CP

Order

Rate

Order

Time

CP

Order

Time

MAVI BASMATI 650000 2,632,500.00 650000 700000 4.05 4.05 14:53:35 14:17:53

MAVI ALKA 647500 2,661,225.00 650000 700000 4.10 4.11 13:41:54 13:14:28

MAVI BASMATI 602510 2,470,291.00 650000 700000 4.10 4.10 13:43:12 13:42:55

MAVI BASMATI 407348 1,649,759.40 650000 725000 4.05 4.05 14:51:54 14:17:46

MAVI SV 144930 588,415.80 650000 163513 4.05 4.06 14:51:54 14:40:04MAVI SV 47388 194,290.80 650000 50000 4.10 4.10 13:43:12 13:08:46

MAVI JMP 25000 101,500.00 650000 25000 4.05 4.06 14:51:54 14:45:37

As can be observed in the table, the buy and sell orders are placed at exactly same or nearly sameprice in all the trades. The buy and sell order size is also nearly same in 4 out of 7 trades. Further in


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all the cases the Buy order by the group member has been placed a few seconds before large sell

order of Sub-Accounts. This indicates that the group members might have information of large sell

order being placed by Sub-Accounts or may be giving a signal to the Sub-Accounts to place their sell

orders. All these trades have happened on September 18 and September 22, 2009.

There are 139 days when members of the Group have traded. Their total purchase is 39,075,735shares and total sale is 43,390,415 shares which is 30.63% of the total market volume on gross

basis for the complete period and 35.34% for these 139 days when they have trade.

There are 12,285,720 shares traded among members of the group i.e. 29.80% of the sharestraded by the members of the group are among themselves. Following is an extract of the

trading among the Group members.

Buy Clients

Sell

Clients

Row

Labels ALKA BASMATI JMP OUDH SV

Total Sell

to Group

Entities Total Sell

% sell toGroup

out of

total sell

ALKA 0 0 359,681 0 238,567 598,248 2,977,728 20.09

BASMATI 0 5,377 2,072,871 1,172,350 478,776 3,729,374 16,376,244 22.77

JMP 0 1,202,995 176,667 1,850 1,405,754 2,787,266 5,931,322 46.99

OUDH 64,400 397,460 58,698 0 615,240 1,135,798 2,080,260 54.6

SV 150 2,167,506 970,463 716,518 180,397 4,035,034 16,024,861 25.18

Grand

Total 712,050 7,331,046 4,634,920 1,890,718 4,816,342 19,385,076 58,608,657 33.08

As being observed in other scrips, here in the case of Maars also, the major counterparties to the trades

of Group members are other members of the Group itself. Apart from the Group members, the other

counterparties to the trades of Group Members are mostly scattered in such cases.

Following table gives the Profit/loss figures for the trades of Group members.Group


Avg Buy


Avg Sell

Price Profit/Loss

SV 15,384,473 50,455,436 3.28 16,024,861 51,638,153 3.22 -880,855

ALKA 770,500 3,075,645 3.99 2,977,728 11,183,003 3.76 -181,995

JMP 5,931,322 19,197,266 3.24 5,931,322 19,257,900 3.25 60,634

OUDH 2,080,260 5,085,770 2.44 2,080,260 5,451,611 2.62 365,841

BASMATI 14,909,180 50,536,015 3.39 16,376,244 56,879,623 3.47 1,248,053

Total 39,075,735 128,350,132 3.28 43,390,415 144,410,289 3.33 611,679


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Observations on trading of Group/FII

13.A list of top counterparties to the sale of shares by the FIIs in the companies issuing GDRs is givenat Annexure A. It is observed for the trading of Group members like Basmati, SV, JMP, Alka and

Oudh that their buy trades were matching on a consistent basis with the sell trades of Sub-

Accounts. For example, in the case of IKF, 75.7% of the shares sold by India Focus are being

purchased by SV, JMP, Oudh, Alka and Basmati. Thus a very high percentage of trades of Sub-

Accounts were matching with the Group entities as counterparty across different companies

raising a suspicion of a possible pre-arrangement between Group and Sub-Accounts due to the

fact that most of the companies examined were illiquid companies and it would be difficult for the

Sub-Accounts to sell their holdings without experiencing major price fall. It was also observed that

Sub-Accounts and aforementioned Indian clients were the major contributor to the volume in

such scrips. When queried, KII and India Focus denied having any link or arrangement with any ofthe entities with which they traded in the Indian markets.

14.The inference that can be drawn from the trading of Group vis--vis FII is that the Group entitieshave been successful in buying large chunks of shares from the Sub-Accounts and then disposing it

off in the markets. Group have maintained volumes in the market but not held on to the shares of

companies examined, therefore it is clear that the Group entities have not bought the shares from

Sub-Accounts with a view of long term investment. The buyers to the shares sold by Group are

either Group members or in majority are scattered investors. Prima facie overall trading by these

suspected entities has given a false impression to the market of high volume probably done so in

order to keep genuine and unsuspecting investors interested in the scrip over the period of

activity before the Group finally off-loaded shares. The connections among the Sub-Accounts and

the Group are discussed in later sections.

15.Most of these companies had issued GDRs in 2009. SEBI also received a complaint in which it wasalleged that a few Indian companies and Investment Bankers located overseas have misused the

GDR route for issuance of shares overseas. As inferred from the complaint, the modus operandi of

the alleged misuse was to issue large sized GDR issues in overseas market and then gradually sell it

in a structured manner to Indian Clients already known to the FIIs. The trading pattern observed

between Sub-Accounts and Group also supports the allegations made in the said complaint.

16. The information regarding the GDR issues was sought from respective companies. Along with theexamined companies, information was also sought from Cals Refineries Ltd (Cals,) as several

complaints, including related to GDR issue, were received against the company.
http://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureA_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureA_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureA_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureA_21092011_p.pdf


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Issue Size of GDRs

Following table provides the details of the issue size of the GDRs of shortlisted companies and the equity

base of the company before and after the GDR issue:

Note: only KSera was listed on both BSE and NSE during the period of examination; rest of the scrips were listed only on BSE.

17. It can be observed from the above table that Asahi issued 299,100,000 shares under GDR when itstotal outstanding shares prior to GDR were only 37,196,000. Thus the issue size of GDR was

approximately 8 times of the total equity of the company prior to GDR issue. The market cap of

the company was at only Rs 2.64 crore prior to GDR issue. In an extreme case, it was found that

Cals issued GDRs nearly 13,133% of its existing equity base. Cals issued its GDR in Dec. 2007.

(Table at Annexure B provides details of GDR issued by the companies examined). Further,

looking at the financials of these companies, as given at Annexure C, it is observed that all the

companies have such financials that may not readily attract investors to subscribe to such large

sized issues. Therefore, successful subscription of these GDR even raises possible doubts about

the genuineness of subscribing investors or the actual motives of the promoters or directors of

companies issuing them.

Name of the

company

Date issue of

GDRs

Pre GDR

equity

(000)

Shares

issued under

GDR (000)

Total

Outstanding

Shares (000)

% GDR to

Post GDR

equity

% GDR to

Pre GDR

equity

Asahi Apr 30, 2009 37,196 299,100 336,296 89 804

IKF May 15, 2009 268,190 162,391 430,581 38 61

Mar 30, 2007 106,690 132,000 238,690 55 123

Avon Jun 19, 2009 16,580 48,000 64,580 74 289

KSera Oct 16, 2009 67,131 134,257 201,388 67 200

Oct 26, 2007 19,513 47,619 67,132 71 244

Cat Nov 06, 2009 31,576 47,860 79,436 60 152

July 27, 2007 5,750 25,286 31,036 80 440

Cals Dec 12, 2007 60,000 7,880,000 7,940,000 99 13,133

Maars Sep 29, 2007 66,160 73,800 139,960 53 112
http://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureB_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureC_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureC_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureC_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureB_21092011_p.pdf


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18.Following table gives the summary of the financials of the companies for the respective financialyear ending:

(in Rs Crores) 2007 2008 2009 2010

Net Sales PAT

Net

Sales PAT

Net

Sales PAT

Net

Sales PAT

Asahi Infrastructure 20.34 0.1 49.7 0.16 45.51 0.2 366.77 34.94

Avon Corporation 39.1 1.44 49.5 1.86 73.59 7 116.74 11.39

Cat Technologies Ltd. 4.06 1.77 6.02 0.87 9.36 2.3 7.93 0.3

Cals refineries Ltd. 0.03 -0.01 0.08 0.69 0.03 0 0 0

IKF Technologies Ltd. 14.35 1 28.7 2.5 48.32 4 53.92 5.22

K Sera Sera Ltd 38.33 -20.3 63.7 -0.3 36.85 -4.3 30.44 7.06

Maars Software I Ltd 35.55 0.05 31.2 0.12 6.34 -3.7 0.94 -1.86

19.The levels of profit after tax compared with the trend of sales during the period leading upto theGDR issue may not provide adequate reassurance to an investor to subscribe to the shares of such

companies, unless there is some other motive or information available to them that may explain

the large investments. The profile of the initial subscribers of the GDRs, as described later, further

supports the sense of doubt regarding the nature of investors. Added to these doubts is the low

price of some shares in the domestic market as compared with the issue price.

Issue Price of the GDRs

20.Following table provides the comparison of issue price of the shares underlying GDRs with theprevalent market price on the day of GDR issue in Indian markets. (Adjusted prices for split/consolidation).

Name of Company Date of

GDR issue

Price at the

time of

GDR Issue

(Rs.)

Price of

underlying equity

paid by the GDR

subscribers(Rs.)

price after

one

month of

the issue

price after

six

months of

the issue

Price on

13/9/11

Asahi Infra* 30-Apr-09 7.40 10.00 14.7 11.4 4.92

Avon Corporation 19-Jun-09 8.87 10.00 8.54 8.62 4.07

Cals Refineries** 12-Dec-07 5.62 1.00 10.13 5.48 0.38

Cat

Technologies

Issue 1 27-Jul-07 5.34 10.00 7.14 9.509.19

Issue 2 06-Nov-09 17.26 10.00 11.25 16.75

IKF Tech Ltd.Issue 1 30-Mar-07 7.35 3.83 7.11 7.01

2.62Issue 2 15-May-09 3.00 3.50 4.95 4.92

K Sera Sera LtdIssue 1 26-Oct-07 30.00 24.15 35.00 29.00

11.45Issue 2 16-Oct-09 21.40 10.00 16.00 11.64

Maars Software I Ltd 29-Sep-07 4.49 10.00 3.78 4.19 0.71

* The share of Asahi was consolidated in the ratio 10:1 on November 25, 2010

**The share of Cals was split in the ratio 1:10 on May 28, 2008


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Surprisingly, even when GDRs were issued at a price higher than that prevailing in the domestic market

they were fully subscribed, e.g. Asahi, Avon and Cat (Issue 1). It is observed that the issue prices of GDRs

of Cals, IKF (Issue 1), Cat (Issue 2) and KSera were at a discount to their prevailing traded price at BSE.

(The issue price in Rupee terms is as per currency exchange rate of the GDR priced in U.S Dollars). No

clear relation emerges between the prevailing market price and that of the GDR issue.

Price/ Volume movement

21.The Price volume chart for the relevant period for each of the aforementioned scrips is given inAnnexure D. From the charts, it is observed that:

prices of the scrips have increased significantly in most of the scrips around and more importantly,immediately after the issue date of GDRs.

in a few instances the price has fallen substantially, a few months after the GDR issue. share price of the companies has become volatile around the period of listing of the GDRs. in half the cases, the volume has not increased around the period when GDRs have been issued but

only thereafter which coincides with the conversion and sale of GDRs in Indian exchanges.

Trading details in these companies before and after the GDR issue (on BSE) are given below:Name of Company Avg Daily

trading

volume for 6

months prior

to GDR issue

Avg Daily trading

volume for 6

months post GDR

issue

Avg Daily

turnover for 6

months prior to

GDR issue

(Rs 000)

Avg Daily

turnover for 6

months post

GDR issue (Rs

000)

%

increase

in

turnover

post GDRAsahi Infra 8,376 104,815 6 132 2,200

Avon Corporation 62,643 526,536 419 5,265 1,257

Cals Refineries 22,122 37,026 586 1,970 336

Cat TechnologiesIssue 1 10,363 323,310 59 6,578 6,578

Issue 2 295,970 288,537 2,625 3,663 140

IKF Tech Ltd.Issue 1 1,736,055 6,014,975 12,482 46,110 369

Issue 2 374,166 1,341,774 1,074 6,241 581

K Sera Sera LtdIssue 1 223,707 259,750 5,112 8,628 169

Issue 2 1,044,947 1,806,370 13,920 24,032 173

K Sera Sera Ltd

(On NSE)

Issue 1 105,171 141,970 2,408 4,747 197

Issue 2 641,106 1,867,869 8,754 24,672 282

Maars Software 125,739 532,039 534 3,912 733
http://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureD_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureD_21092011_p.pdf


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22.As can be seen from the above table, the companies examined were generally less-liquid beforethe GDR issues compared to the period Post GDR issues. After the GDR issue there has been

substantial increase in the average daily volume of these scrips.

Cancellation of GDRs

23.Following table gives a comparison of GDRs issued and GDRs cancelled in these companies till May31, 2010.

Name of

Company

Pre GDR

Equity shares

(000)

Total shares

issued under

GDR (000)

Total Shares

cancelled

(000)

% of GDR

cancelled

to GDR

issued

% of GDR

cancelled to pre

GDR equity

shares

Asahi Infra 37,196 299,100 53,100 17.75 155.28

Avon Corp 16,580 48,000 16,236 33.83 97.92

Cals Refineries 60,000 7,880,000 3,538,764 44.90 5,897.94

CAT Technologies 5,750 73,686 15,891 21.57 276.34

IKF Technologies 136,190 294,391 163,020 55.38 119.70

K SERA SERA 26,062 181,876 84,684 46.56 324.93

Maars Software 66,16073,800

57,928 78.49 87.55

24. It is observed from the above table that between 17.75% and 78.49% of the GDR issued by thecompanies have been cancelled by converting it to normal equities in the domestic Indian market.

In the case of Avon, 33.83% of the GDR issued were cancelled by May 31, 2010 i.e. within 1 year of

the issue of GDR (Date of GDR issue June 19, 2009). Similarly in the case of Asahi, KSera and IKF,

17.75%, 46.56% and 55.38% of the GDR issued were cancelled by May 31, 2010, respectively. In

the case of Cals, which issued its GDRs in December 2007, 44.90% of the GDRs have been

cancelled by May 31, 2010.This indicates that post GDR issue a large number of GDRs have been

converted and sold in Indian Stock Markets. The number of GDRs cancelled becomes even more

significant if we compare them with the pre GDR equity of the companies, since the floating stock

of the company in the Indian Exchanges increased manifold. A quick comparison with GDRs issued

by other well known Indian companies brings out the difference in a stark manner (details inAnnexure E): firstly the percentage of GDR/ADR issued forms a minor proportion of 3% to 24% of

the equity capital of the companies and second the conversion of GDRs to shares in India is

insignificant as the percentage of GDRs in the capital structure remains extremely stable over

time. For example the Infosys ADR constitutes 19.16% to 17.59% of its equity capital over the

three year period March 2008 to March 2011.
http://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureE_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureE_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureE_21092011_p.pdf


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25.The critical point that emerges for the interest of investors is the large and sudden increase infloating stock due to GDRs converted to shares in the Indian market and the possible effect on the

price of the stock. Hence, in the case of Asahi 531,000 GDRs have been cancelled and converted

into 53,100,000 shares in Indian markets (1 GDR=100 shares underlying in this case) while total

equity base of Asahi was that of 37,196,000 shares before issue of GDRs. Similarly in the case of

Avon, IKF, KSera, CAT and Cals, the number of GDRs converted and sold in India is higher than

their pre-GDR equity base. The market price of all these scrips is below price at the time of GDR

issue. The earlier narration also brought out the sharp fall in price due to large selling by Sub-

Accounts when not supported by the Group. When subscribers to GDRs convert them to shares in

the Indian market there is a sudden surge in supply of shares, an event that is unknown to

domestic shareholders. This surge would be similar to the listing and trading of additional shares

after an FPO (Follow-on Public Offer) or QIP (Qualified Institutional Placement) but different to theextent that in an FPO or QIP prior announcement exists in the market and knowledge of inflow of

shares is available with shareholders/investors.

Entities converting (cancelling) GDRs

26. It is also observed from the GDR cancellation data for these shortlisted scrips that the Sub-Accounts are mainly cancelling the GDRs and selling the resultant shares on BSE and/or NSE.

Further, cancellation of GDRs in most of the cases has started within 2 to 3 months of issuance.

The data of GDRs converted by Sub-Accounts is given below:

Name of

CompanyName of Sub-Accounts converting GDR

No. of shares

converted

under GDR

(000)

% of total

GDR

converted in

the company

Asahi InfraINDIA FOCUS CARDINAL FUND 43,100 81.17%

KII LTD 10,000 18.83%

Avon

Corporation

INDIA FOCUS CARDINAL FUND 13,896 85.58%

KII LTD 2,340 14.41%

K Sera Sera Ltd

INDIA FOCUS CARDINAL FUND 36,723 43.36%KII LTD 33,761 39.86%

ARES DIVERSIFIED 5,450 6.43%

SOPHIA GROWTH 5,150 6.07%

RHODES DIVERSIFIED 3,600 4.25%

IKF TechnologiesINDIA FOCUS CARDINAL FUND 29,670 95.64%

KII LTD 1,350 4.36%


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Name of

CompanyName of Sub-Accounts converting GDR

No. of shares

converted

under GDR

(000)

% of total

GDR

converted in

the company

Cat Technologies

RHODES DIVERSIFIED 6,750 42.48%


MAVI INVESTMENT FUND LIMITED 1,260 7.93%

ARES DIVERSIFIED 1,500 9.44%


KII LTD 450 2.83%

Maars Software



KII Ltd 4,500 7.78%

MAVI INVESTMENT FUND LIMITED 2,600 4.49%

*ICICI BANK is the domestic custodian of the GDR Issue 1(GDRs issued in March 2007) by IKF. The cancellations reflected in the table by ICICI

BANK Ltd. are done by it in the capacity of the domestic custodian for GDR Issue 1 of IKF. The names of beneficial owners of the GDRs on whose

behalf cancellations have been done by ICICI BANK Ltd is not available with SEBI.

In the case of Asahi, IKF and Avon, 100% of the cancellation has been done by India Focus and KII. In the

case of K Sera 83.22% of the cancelled shares are done by India Focus and KII. The PAN of Sophia Growth

and Rhodes Diversified is same and therefore they are one and the same entity. Therefore, it is observed

that along with India Focus there are three Sub-Accounts appearing frequently in cancelling GDRs and

selling shares, viz. KII, Mavi and Sophia.

Merchant Banker/Lead Manager/Arranger to GDR Issues

27.The information submitted by these issuer companies during the course of investigation regardingtheir GDR issues revealed the following similarities in all the examined companies, (except Cals):

- The Merchant banker/Lead Manager/Arranger to the issue is PAN ASIA ADVISORS Ltd (Panasia),- The proceeds of the GDR issue are deposited in European American Investment Bank AG,

Austria (Euram Bank)

Panasia clarified to SEBI that they are a registered entity with FSA and have been allowed to provide and

undertake, among other things, corporate advisory and placement services.

Initial Investors to GDRs

28.The list of initial GDR subscribers of the companies examined is provided at Annexure F. It isobserved from the list of initial allottees that names like Flamboyant International Ltd, Trend

Setter Enterprise Corporation, Flagstaff Investment Ltd, Imagination Network Inc, Futura Group
http://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureF_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureF_21092011_p.pdf


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Limited, Figura Group Limited, Knightbridge Management Inc, Greenwich Management Inc and

Tradetec Corporation, have invested in GDRs of more than one of the shortlisted companies.

Further, it was also observed that the aforesaid investors have also got allotment of few other

companies like Proto Developers Ltd and IT People (India) Ltd wherein GDRs were issued with

Panasia and Euram Bank respectively involved as Lead Manager and Bank holding GDR deposits.

29.Figura group ltd and Futura Group Ltd are connected to each other as the address of both of theseentities is exactly the same. Further, Flagstaff Investment Ltd and Figura Group are connected as

the stamp used by them in their letters is same i.e. of Flagstaff Investment. All the names listed as

investors for Asahi, Avon, Cat, KSera, IKF, It People (India) Ltd and Proto Developers Ltd in

Annexure F are probably legal entities created only for routing investments since searches on

their names on the internet and a broader Google search, returned nil results for them. The

website address printed on their letterheads either do not exist or has only one page. Furthernearly all of them have nonexistent email addresses printed on their letterheads and emails sent

to those addresses have returned undelivered. Most of the websites are hosted at one domain i.e.

http://dompark.dada.net/.

Role of Arun Panchariya, Panasia, Euram bank & India Focus

30.A repetitive pattern emerges from the examination conducted so far i.e. same set of Sub-Accountsselling most of their holdings to the same set of counterparties, most of the GDRs were issued in

2009, same bank (Euram bank) where proceeds of the GDRs were deposited and these GDR issues

managed/arranged by Panasia. Further examination of the agencies connected to the GDRs was

conducted. The information was collected primarily from SEBI website, LinkedIn, MCA website,

individual websites of different entities, Google and submissions made by various entities:

31.As mentioned earlier that except for Cals, Panasia has been the Arranger to the issue. Mr. ArunPanchariya is the founder and owner of Pan Asia Advisors Ltd (as per website of Euram Bank Asia).

32.SEBI investigation discovered connections of the suspected entities among themselves and withother counterparty entities. Most of these entities are connected to Arun Panchariya and his

brother Satish Panchariya who is the director of Alka India Ltd., a listed textile company with a

history of regulatory actions at SEBI. The address of Alka India (mentioned in SAT order dated May

06, 2010 in the matter of Alka India Ltd) and Panasia in India is same. Alka India is observed to be

trading as counterparty in a few scrips where GDR issues were managed by Panasia.
http://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureF_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureF_21092011_p.pdfhttp://www.sebi.gov.in/cms/sebi_data/commondocs/GOAnnexureF_21092011_p.pdf


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33.One of the initial investors in GDRs, the arranger, the FIIs cancelling GDR, the counterparties tothese FII trades and the bank where proceeds are deposited are all related to Panchariya. These

evidences clearly indicate that Arun Panchariya has control over all aspects of the operation of

structured GDRs - providing services of placement of the GDRs issue, assisting the GDR holding

entities to exit by arranging to purchase the GDRs from them. Prima facie, Arun Panchariya has

facilitated issue of GDRs for several companies by arranging a common set of subscribers, which

otherwise may not have been possible given the magnitude of capital raised in comparison to

existing equity capital of these companies, their unimpressive financial statements and low volumes

in trading of their shares.

34. In the GDR issue of all the companies examined, whenever Panasia has been the Arranger of theissue, proceeds have been deposited with European American Investment Bank AG (Euram), a bank

incorporated in Austria. Euram is also registered as an FII in India. In its existence as a FII, Euram hasnever made an investment in India in its own name and is only listed as an investor in India Focus.

35.Euram has a joint venture with Arun Panchariya led Panasia known as Euram Bank Asia Ltd, that islocated in Dubai. Euram Bank Asia Ltd. proclaims to offer access to the groups global financial

services and is a provider of investment banking and private banking services. The details of EURAM

BANK ASIA Ltd. are at http://www.eurambankasia.com wherein it is stated that their head office is

in Dubai International Financial Center. According to the website of Dubai International Financial

Center, Arun Panchariya and Satish Panchariya are the directors of Euram Bank Asia Ltd.

36.The Sub-Account, India Focus, is registered under the FII, Euram. Mr Arun Panchariya wasthe director of India Focus until October 28, 2010. Both Euram and India Focus got registered

with SEBI in November 2008 and December 2008, respectively.

37.During the period January 01, 2009 to December 31, 2011, there were 21 companies for whichPanasia was the arranger of the GDR issues and India Focus was observed cancelling GDRs and

selling shares in Indian Markets. The list of such companies is not exhaustive as Panasia didnt

provide SEBI names of Indian companies for which GDRs issues have been managed by it. The

information was collected from various sources including Panasia website. As, India Focus was

observed to be selling shares of few other companies which have issued GDRs, it is likely that more

such issues might have been managed by Panasia.

38.Alka India and Oudh are among the shareholders of Basmati. Together, they hold 37.68% of theshares of Basmati. Basmati holds 27.8% of the shares of Oudh. (source: MCA website)


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39.One of the original investors in Proto, a GDR issue managed by Panchariya, was Atiq Al AqadiTrading Company, Dubai. It had earlier placed an export order worth Rs 4.20 Crores in 2003 with

Alka India. Interestingly, during the same period another export order of Rs 2.50 Crores was bagged

by Alka India from Vintage FZE, UAE, which is owned by Arun Panchariya. Further, one Atique Al

Aqadi Trading LLC is also currently shown as an investor in Sub-Account, India Focus.

Role of FIIs/Sub-Accounts

40.On examining the trading activity of India Focus during the period January 01, 2009 to May 31, 2010,it is observed that it traded shares of Rs. 3,000 million in 22 stocks on BSE/NSE during the period,

out of which nearly Rs. 2980 Million in 18 stocks consisted of sale of shares from GDR cancellation;

only 20 million or 0.67% of total transactions over the relevant period pertained to four nonGDR

scrips. In total, India Focus cancelled GDRs worth Rs. 3,633 million (calculated on the basis of closing

price of the scrip on the day of cancellation) during the aforesaid period. This behavior of India

Focus and Euram indicates that the sole objective of the registration of India Focus as a Sub-

Accounts is to sell GDRs and take funds out of the country and not to invest in Indian Companies, as

is the expected objective of FIIs. Euram Bank has prima facie facilitated India Focus by getting

registered as an FII and contrary to other FIIs it has not done any trading in the stock market.

41.On further examining the counterparties of India Focus across the market it is observed thatsuspected connected entities of Panchariya are major counterparties of the selling by India Focus

not only in the companies examined but in several other companies also. The GDRs of several suchcompanies were arranged by Panasia and during the aforesaid period in all 18 scrips sold by India

Focus one or more members of Group have been counterparties to the trade. In total, shares worth

around Rs. 800 million, out of total Rs. 2980 million sold by India Focus, were bought by Group on

BSE and NSE. It may be noted that all these shares sold by India Focus are after cancellation of GDRs.

Further, from examination of trading, after serving as counterparties the Group are not holding

these shares and are selling it within the day or in the days following.

42.These Sub-Accounts were asked to give the rationale behind trading in such illiquid scrips. Followingis the summary of replies :

The trading in GDRs of these scrips is based on the rationale that there is deep discount available to

the buyers of such GDRs in overseas market. Buying these GDRs and subsequently selling in the

Indian markets after cancellation is highly risky due to the low liquidity of the shares. However, a


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decision is only taken after considering the discount available and amount of risk associated with the

scrip due to its low liquidity.

43.Table at Annexure G provides a comparison between the prices of the GDRs (in Rupee) onLuxembourg Stock Exchange(LSE) with the price of the same on BSE. It reveals the absence of

arbitrage between prices at LSE and that at BSE. It also begs the question as to what discount is

available to buyers of such GDRs. Initial subscribers paid full price, yet they were willing to sell these

investments at deep discounts. F

market order on issue of gdr.pdf

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